Is KEYS Stock A Buy or Sell?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Keysight Technologies Inc (NYSE:KEYS) changed recently.

Is KEYS stock a buy? Keysight Technologies Inc (NYSE:KEYS) has seen a decrease in enthusiasm from smart money recently. Keysight Technologies Inc (NYSE:KEYS) was in 27 hedge funds’ portfolios at the end of December. The all time high for this statistic is 50. Our calculations also showed that KEYS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s analyze the fresh hedge fund action encompassing Keysight Technologies Inc (NYSE:KEYS).

Do Hedge Funds Think KEYS Is A Good Stock To Buy Now?

At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 49 hedge funds with a bullish position in KEYS a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Ariel Investments held the most valuable stake in Keysight Technologies Inc (NYSE:KEYS), which was worth $109.3 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $101.1 million worth of shares. Polar Capital, Giverny Capital, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Giverny Capital allocated the biggest weight to Keysight Technologies Inc (NYSE:KEYS), around 4.09% of its 13F portfolio. Sirios Capital Management is also relatively very bullish on the stock, dishing out 2.93 percent of its 13F equity portfolio to KEYS.

Since Keysight Technologies Inc (NYSE:KEYS) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that slashed their entire stakes in the fourth quarter. Intriguingly, Michael Rockefeller and Karl Kroeker’s Woodline Partners dropped the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $16.9 million in stock, and Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management was right behind this move, as the fund sold off about $7.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 9 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Keysight Technologies Inc (NYSE:KEYS) but similarly valued. We will take a look at ArcelorMittal (NYSE:MT), Coupa Software Incorporated (NASDAQ:COUP), Yandex NV (NASDAQ:YNDX), Slack Technologies Inc (NYSE:WORK), Fresenius Medical Care AG & Co. (NYSE:FMS), Williams Companies, Inc. (NYSE:WMB), and Consolidated Edison, Inc. (NYSE:ED). All of these stocks’ market caps match KEYS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 37 hedge funds with bullish positions and the average amount invested in these stocks was $1601 million. That figure was $593 million in KEYS’s case. Slack Technologies Inc (NYSE:WORK) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 9 bullish hedge fund positions. Keysight Technologies Inc (NYSE:KEYS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for KEYS is 28. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately KEYS wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); KEYS investors were disappointed as the stock returned 8.7% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.

Follow Insider Monkey on Twitter